A new report by a legislative watchdog group recommends that the legislature and the Mississippi Department of Revenue should examine the possibility of privatizing the state-run distribution of liquor and wine.

The Joint Legislative Committee on Performance Evaluation and Expenditure Review or PEER Committee released the report, which also criticized the DOR for worker safety, equipment maintenance, customer service, and inventory issues at the state-owned warehouse which handles distribution for liquor and wine in the state.

The PEER study said that divesting the wholesaling of wine and liquor would likely reduce the revenue collected for the state from alcoholic beverage sales. The study also said that contracting out management of the state-owned liquor warehouse to a private firm would likely not save taxpayers much money, likely 10 percent or less.

Divesting the distribution of wine to private firms, according to the study, would also result in lower revenue collections, but could benefit operations at the warehouse.

The Alcoholic Beverage Control warehouse employs 106 state workers, held 427,709 cases of booze (the capacity is 450,000 cases) and can ship 20,000 cases per day. 

In fiscal 2018, the ABC generated $114.2 million in revenue. Subtracting the cost for warehouse operations ($5.03 million) and ABC enforcement ($2.07 million), the wholesale operation generated revenue of $107.1 million for the state treasury.

In the 2019 session, the legislature appropriated up to $4 million for additional warehouse space, but PEER said in its report that the DOR doesn’t have a formal plan for incorporating new space into its operations.

According to PEER, one of the problems with the state-run warehouse is that any special order items cost the state because the DOR must purchase them in advance to have them shipped to the warehouse. 

The warehouse receives payment only when the retailer receives the special order. Also, since the items in the warehouse belong to vendors and are not purchased by the state, taxpayers are responsible  for broken or damaged goods in the warehouse.

Mississippi is one of 17 states that is what is known as a control state. The DOR regulates the sale of alcohol in Mississippi through the licensing of retailers, taxation at both the wholesale and retail levels, and wholesaling of both liquor and wine. The Magnolia State is one of five states that wholesale both wine and distilled spirits. 

The DOR, unlike some other control states, doesn’t manage retail locations like Alabama does, for example.